Based on data from CoinMarketCap, Bitcoin went up by 9.34% in the past week, with Ether (ETH) and Binance Coins (BNB) recording gains of 12.38% and 15.39% respectively, over the same period.
Other top gainers include Cardano (ADA) at 42%, Ripple (XRP) at 37.89%, Dogecoin (DOGE) increased by 34.33%, and Polkadot (DOT) at 8%, and Uniswap (UNI) increased by 15%.
A number of factors notably contributed to the recent significant price boost in the crypto market and top of the list for speculators is that money from the last stock market sell-off flowed into the crypto market.
Sharing his thoughts on the speculation, Gianni Di Poce, a financial analyst and the president of the Mercator, LLC said,
“I don’t think that a stock market sell-off would boost the crypto market. In fact, cryptocurrencies have been an excellent barometer for risk-on/risk-off scenarios since the March 2020 low. A cryptocurrency collapse at this point would be indicative of rising deflationary pressures and could eventually translate into weakness for stocks.”
His reply outrightly pointed out that the stock market sell-off had no effect on the crypto market price increase.
A Recap of the Stock Market Sell Off
In case you missed it, the last stock market crash happened in July, earlier this year. The market experienced a sudden and big drop in price value. The sell-off has been linked to fears of a new wave of COVID-19 lockdowns, linked to the emergence of the highly contagious Delta variant.
The drop in the prices of stocks affected different sectors of the economy. The biggest drop in the value of stocks was recorded by the Dow Jones Industrial Average. The market index company’s stocks fell by 725 points or 2.1%.
The stocks of SP 500, another market index company, fell by 68.67 points or 1.6%. Travel companies like American Airlines, Carnival Corp., United Airlines, and Norwegian Cruise Lines were not left out in the stock value depreciation.
Oil companies like Marathon Oil and Occidental also saw their stocks fall by about 5% and 4%, respectively while the stocks of the Nasdaq Composite reduced by 152.25 points or 1.1%. There have been other cases of stock market crashes that are caused by either terrorist attacks, recession, or even wars.
The Relationship Between the Crypto Market and the Stock Market
According to the statements made by Gianni Di Poce, the stock market crash or sell-off did not contribute to the crypto market rebound. However, that does not completely erase the relationship between both markets.
The fact that stocks have lower risks than crypto assets make them a preferred choice for some people. Since stocks are directly linked to companies, investors can receive useful information and updates that can help in making decisions. While the value of crypto assets can experience sudden and drastic changes without prior notice.
The stock market is also regulated by government agencies like the U.S. Securities and Exchange Commission (SEC), which protects investors, while the crypto sector has little or no regulatory policies.
A considerable number of people also choose the crypto sector over the stock market due to some setbacks in the latter. Investing in crypto assets gives you independent power over your wealth since the economy is not controlled by a governmental or central organization.
When an individual invests funds into crypto, they own that amount of that digital currency they have purchased. For stocks, however, when individuals purchase them, they do not have absolute control over them as they are equities or part ownership of that company. The level of control usually depends on the fraction of stocks purchased.
In addition, investing in stocks, especially, when you are in another country, can be a very long process. Meanwhile, the use of crypto is not restricted by country or location.
What Led to the Recent Boost in the Crypto Market?
If the fall in the value of stocks did not cause the boost in the crypto space, what then could have led to the increase in the value of crypto assets? There is no concrete reason why the prices of cryptocurrencies increased.
As very volatile assets, the price of crypto can abruptly fall or even go up. Other factors like the increase in adoption, institutional investors, and the inflationary nature of fiat currencies could be responsible for the recent runup.
There are also claims that the crypto market could be repeating the historical price increase recorded in 2013. If those speculations are anything to go buy, investors might be in for a real treat and maybe funds from the stock market might be headed the ‘crypto’ way before the year ends.
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